Betting Against Beta: Equity Factors, Daily

This data set is related to “Betting Against Beta” (Frazzini and Pedersen, 2014). A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight riskier securities instead. This behavior of tilting toward beta suggests high-beta assets require lower risk-adjusted returns than low-beta assets. Indeed, the security market line for U.S. stocks is too flat relative to the CAPM and is better explained by the CAPM with limited borrowing. This raises several questions: What is the magnitude of this anomaly relative to the size, value and momentum effects? Is betting against beta rewarded in other countries and asset classes? How does the return premium vary over time and in the cross section? How does one bet against beta? To explore these questions, we construct market-neutral betting-against-beta (BAB) factors, which are long leveraged low-beta assets and short high-beta assets.

This data set is an updated and extended version of the paper data, for which we provide daily long/short BAB equity factors. BAB equity factors are for U.S. equities and 23 international equity markets (as well as multiple international and global aggregates). Daily data is updated and extended monthly. We also provide the returns for several additional global factors for reference.

Data Sets

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees.

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Neither the author nor AQR undertakes to advise you of any changes in the views expressed herein.

This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein.

Past performance is no guarantee of future results.

Certain publications may have been written prior to the author being an employee of AQR.

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